Defense Says Scrushy Was in the Dark
The defense at Richard Scrushy’s fraud trial tried to show Tuesday that aides to the former HealthSouth Corp. chief were behind an earnings overstatement and hid it from him to cover up their own mistakes handling mergers and expenses.
Using a black marker to spin a complicated web of numbers on a piece of paper at the front of the courtroom, Scrushy lawyer Jim Parkman asked a former finance executive whether anyone could tell what was going on at the company without seeing all of its true revenue and expenses.
No, answered former Chief Financial Officer Mike Martin, one of a group of former executives the defense blames for the scheme.
“That’s what y’all did and how you planned it, so [Scrushy] wouldn’t know what the whole picture was?” said Parkman, making a statement as much as asking a question.
The prosecution objected and the judge agreed, letting the question hang in the courtroom unanswered.
Countering Martin’s claims that he disliked being in the scheme, Parkman asked Martin why he didn’t follow through on threats to quit before finally leaving the company in 2000. “Mr. Scrushy kept you there?” he asked with eyebrows raised.
Referring to the John Grisham novel “The Firm,” about a young attorney who goes to work for a scheming law firm no one could quit, Martin said he could see no way out at HealthSouth.
“That’s what I felt like,” Martin said.
Scrushy is charged with overseeing a seven-year fraud that began in 1996 and inflated HealthSouth earnings by some $2.7 billion to make it appear the company was meeting Wall Street expectations.
The defense contends that Martin and other former Scrushy subordinates committed the fraud on their own and got rich climbing through the corporate ranks.
Martin’s fifth day on the stand started on an odd note as he testified about his own angry threats to kill people at work.
The testimony could be important because prosecutors have portrayed Scrushy, not Martin, as intimidating and bullying underlings at the rehabilitation chain.
